The Problem with Crypto-Currencies and Why SolarCoin is Different

Published by on April 13, 2014|Comments Off on The Problem with Crypto-Currencies and Why SolarCoin is Different

Starting from nothing but an idea and computer electrons in 2008, today a Bitcoin will bring you $409.68 (as of the moment I checked – 10:18 AM Pacific Time, 4/13/2014) if you want to turn it into dollars. It comes in units as small as 1 Satoshi (1 Satoshi = 1E-8 BTC), which is worth 0.00040968 cents. Or one cent will get you 0.00002194 BTC or 2,441 Satoshi. This facilitates its use in the smallest of transactions.

The enormous success of BitCoin (BTC) has, naturally, spawned a whole bunch of BitCoin wanna-bees. Everyone seems to think that if Satoshi Nakamoto can do it, so can they.

As a result, there is a currency out there for almost everything. AllCrypt.com (https://www.allcrypt.com/…) currently trades 127 alt-currencies in addition to Bitcoin. And there are another 186 identified cryptocurrencies there that haven’t yet gotten enough votes to be listed on the exchange. And there are a bunch of other exchanges which trade in others that AllCrypt hasn’t heard about yet.

The names of the coins alone are interesting. There are coins themed on locations such as FloridaCoin, MilanCoin, NewYorkCoin, PhoenixCoin, MediterraneanCoin, SpainCoin, PolCoin (Poland), CrimeaCoin, VegasCoin, WorldCoin and even MoonCoin and MarsCoin. AuroraCoin is an alt-coin created because of the continuing monetary crisis/problem in Iceland – and which BTW has a better-than-most chance of actually succeeding.

There are coins with a political spin such as RonPaulCoin, and TeaCoin (or was that a bunch of British nerds in their flat trying to come up with a name at 4 PM?).

There are coins emulating what UPS and FedEx did in the shipping business, by trying to sound like they are government sponsored or authorized, such as GreencardCoin, USA (PatriotCoin), USDE, FederalReserveSC, Bernankoin, and there’s even a counter to that, the RevolutionCoin with the symbol “CHE”.

There are religion themed coins such as JesusCoin, and EternalCoin. Not to be left out, some Pastafarian has created NoodlyAppendageCoin.

There’s BeerCoin, and VodkaCoin, PastaCoin and CryptoApples, PizzaCoin, as well as ColaCoin.

And then there are the vice-related coins like LottoCoin, LeafCoin, and POTCoin, SexCoin, and even CryptoMeth. These coins may have nothing to do with the vice or activity they imply, but if they don’t I have to ask their developers: If you didn’t want that association, why did you put it in the name of your coin?

A considerable amount of effort must be expended to create an alt-coin. There is the cryptocurrency itself and the electronic wallet that all possessors of a coin must have on their electronic device, so the program must work on a wide range of computer and smart-phone platforms. There’s marketing to get some people to start speculating in it, there’s setting up the mining operation so that the virtual miners of the world (can you believe there’s a large community of these people?) can start “earning” the coin so that they can sell it on an exchange (like AllCrypt.com).

These alt-currencies are all attempting to emulate Bitcoin’s success and most are an effort by someone to make themselves kings of their own currency, bestowing a large chunk of it on themselves and hoping that someone will eventually give them dollars or Bitcoin in exchange for some of their made-up coins. Set up your currency with an attractive name, set up the wallet, grant yourself a bunch of it and let the miners and the speculators start a frenzy into which you judiciously release your coin at a rate that satiates demand but doesn’t crash the value to nothing. When it eventually crashes anyway, take your software, put a different name and logo on it, and do it all again. And no one needs to even know who you are (they still haven’t caught up with the real Satoshi Nakamoto the creator of BitCoin – or have they?).

Now crypto-currency itself is a neat idea and there are aspects of it that really appeal to me and lots of other people. A currency that I can reliably and instantly transfer around the world to pay any debt with no fee added, and to do it anonymously: Wow, that’s great! What doesn’t excite me, is the fact that most of these currencies are little more than get-rich-quick schemes for the founders, with no real purpose or redeeming social value.

We already have Bitcoin, a functioning default cryptocurrency that is being widely accepted worldwide that can be converted into other currencies. Why would we need another one, much less 313 more?

Certainly most, if not EVERY ONE, of the alt-coins are destined to fail. Maybe PotCoin, SexCoin, or CryptoMeth will take off to serve a niche community of people who actually deal in those sorts of things, but probably not. Maybe AuroraCoin can survive in Iceland because of the problems with their native currency.

Fact is, most if not all of them are simply gimmicks. Some have earned designation as “scamcoins.” Even if they are legitimate, we have to admit that we don’t want a different coin for each thing we want to buy or each place we go. Except for Ducky (NCIS), we aren’t likely to be interested in a currency named after our favorite species of dog (Yes, there is a CorgiCoin). We generally want as few currencies as possible.

But there is one brilliant exception to all of them and it is the only one I own (besides Bitcoin), and that is SolarCoin.

All currencies depend on the assumption that someone else will accept it for the things they have to give. In order to succeed, an alt-coin must eventually become a currency for the exchange of tangible things. Bitcoin has managed to do this. Most alt-currencies don’t even seem to have a plan for how that is going to happen, except within the community of miners and speculators that stay up all night playing with working on that sort of stuff.

But SolarCoin is different because it will mostly be distributed to people that are actually producing something that people want and need. One SolarCoin (SLR) is granted for each documented MW-hr of solar generated electricity. This isn’t the only compensation solar electrical generators get. No, this is IN ADDITION to any economic benefit that generation has for people, be it sales of the generated electrical energy or reductions in one’s electric bills.

SolarCoin is being created with the express purpose of encouraging more people to install solar generating facilities. Whether or not it succeeds depends upon the value that SLR can achieve.

As with all alt-currencies, value or SLR depends upon its use. If people will use SLR as a means of conducting economic transactions, then it will work to incentivize solar electric generation. If it fails to become a viable alternative currency in the wider world, then it too will suffer the fate of most of the alt-currencies and become worthless.

Another positive feature of SLR compared to Bitcoin and most other alt-coins is that only 0.1% of the currency is reserved to compensate the founders and developers. 99.4% of SolarCoins will eventually be given to solar electricity generators, such as people with solar panels on their roof. SLR will be distributed to lots of people and not hoarded by the founders, as occurred with Bitcoin. The remaining 0.5% of SLR will be given as charitable grants to environmental nonprofit organizations.

So, when you eventually become interested in alternative currencies (I’m quite certain you eventually will), which one are you going to use – Bitcoin, CryptoMeth, or SolarCoin?This is what makes SolarCoin different. By adopting and using SolarCoin we encourage something that we want to see flourish in our world: Renewable energy production. And I believe that there are a lot of people that feel this way. Regardless of the appeal that HobbitCoin might have for me, I just don’t see the benefit to using it over Bitcoin or more traditional currencies and I certainly cannot see millions of people wanting to use it in their daily lives.

That is the reason that SolarCoin is going to succeed. Regardless of our political power, we have the ability to start accepting SolarCoin for the things we produce, and if a few people will start accepting it, we will soon have the ability to start using it for everything. To begin with, all businesses are not going to accept it and that’s fine: We can choose to patronize the businesses that do.

SolarCoin will succeed if a few people will simply take a Kierkegaardian leap of faith and start accepting it for their goods and services and I believe that lots of people will. That is why I am actively speculating in the eventual success of SLR, taking dollars out of my pocket and buying it. In doing so I am driving up the value of each SolarCoin and increasing the incentive that people have to install solar collectors.

Currently: About 0.5 cents per SLR – in case you were wondering.

Eric Stetson contributed to the writing of this diary and I thank him for his input.